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Hong Kong Regulator Enhances Crypto Custody Standards Amid Rising Global Security Threats

In a significant move, the Hong Kong Securities and Futures Commission (SFC) has implemented stricter custody standards for licensed virtual asset trading platforms (VATPs).

These new requirements focus on enhancing the protection of client assets and address gaps highlighted by recent global security incidents that resulted in billions in losses.

The SFC's circular outlines minimum standards, including robust cold wallet operations, oversight of third-party wallets, and enhanced transaction verification processes.

Dr. Eric Yip, the SFC’s Executive Director of Intermediaries, stressed the importance of client asset protection amid the increasing number of cybersecurity incidents.

The initiative is part of the SFC’s broader strategy to develop a competitive and sustainable digital asset ecosystem in Hong Kong.

In response to ongoing threats, the guidelines mandate real-time security monitoring and independent assessments of custodian practices.

These efforts aim to differentiate Hong Kong from regions like Singapore, which has maintained a more restrictive regulatory approach to crypto services.

The SFC's move aligns with its ongoing ASPIRe roadmap, promoting a robust and secure environment for virtual asset activities.

The new standards will take immediate effect, with a focus on fostering trust and resilience within the rapidly evolving crypto market.

As a result, Hong Kong is positioning itself as a leading hub for digital assets while prioritizing regulatory oversight and security.